Page 8 - NorthAmOil Week 13 2022
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NorthAmOil                                    INVESTMENT                                          NorthAmOil


       Vermilion to acquire Leucrotta




       in $382mn deal




        WESTERN          CANADA’S Vermilion Energy announced on  are projected to produce about 13,000 barrels of
        CANADA           March 28 that it would acquire Leucrotta Explo-  oil equivalent per day in 2023. It is anticipated
                         ration in a deal valued at CAD477mn ($382mn).  that this could be expanded to 28,000 boepd in
                           The deal will give Vermilion an additional  the next few years.
                         77,000 net acres (312 square km) of mineral   “We have conservatively identified 275 mul-
                         rights in the Montney shale play, which spans  ti-zone, extended reach drilling prospects to
                         Northern British Columbia and Alberta. Both  date, representing an expected two decades or
                         companies saw their share prices rise following  more of low-risk, self-funding, high deliverabil-
                         the announcement.                    ity drilling inventory with strong rates of return,”
                           Under the terms of the agreement, part of  Vermilion said in a press release.
       Leucrotta’s acreage is   Leucrotta’s acreage base and about CAD43.5mn   Vermilion has stated that it would inject
       located in the Montney   ($34.8mn) in cash will be transferred to a new  CAD75mn ($60mn) into infrastructure devel-
       shale play.       company, managed by the existing Leucrotta  opment and drilling across the assets this year,
                         team, and only known as ExploreCo currently.  including the drilling of a six-well pad in Alberta.
                         Leucrotta shareholders will receive CAD1.73   As a result of the acquisition, Vermilion is
                         ($1.39) in cash as well as one common share  raising its exploration and discovery capital
                         and 0.1917 common share purchase warrants in  budget to CAD500mn ($400mn) this year, and
                         ExploreCo for each share held.       increasing its annual production forecast to
                           The deal also includes Vermilion’s acquisi-  86,000-88,000 boepd.
                         tion of a 12.5% stake in ExploreCo for around   The deal marks Vermilion’s second acquisi-
                         CAD14mn ($11.2mn). A break-up fee of  tion this year after raising its stake in the Irish
                         CAD20mn ($16mn) payable to Vermilion has  offshore Corrib field to 56.5% via a $434mn
                         also been factored into the agreement in the  purchase of Equinor’s interest in the project. The
                         event that the deal falls apart.     company’s acquisition of Leucrotta is anticipated
                           According to Vermilion, the Leucrotta assets  to close in the second half of May.™

                                                   PERFORMANCE

       Shell starts production at



       PowerNap project in Gulf





        GULF OF MEXICO   SHELL announced on March 29 that it had  in 2019, and the super-major estimated at the
                         started production at the PowerNap project  time that it would have a peak production rate
                         in the US Gulf of Mexico. PowerNap is a sub-  of 35,000 boepd. The latest announcement thus
                         sea tieback to the Olympus platform, which is  marks a downward revision of output expecta-
                         also operated by Shell and located in the Mars  tions for PowerNap. However, the breakeven
                         Corridor.                            price was estimated in 2019 to be less than $35
                           The PowerNap project has an estimated peak  per barrel, and with US crude prices now above
                         production rate of 20,000 barrels of oil equiv-  $100 per barrel, the barrels that will ultimately
       PowerNap is a subsea   alent per day (boepd) from three wells. Shell  be produced at PowerNap will be considerably
       tieback to the Olympus   noted that the oil would be produced using a  more profitable than they were when the final
       platform.         single insulated 19-mile (31-km) flowline and  investment decision (FID) was reached.
                         high-pressure gas lift capability.     Subsea tiebacks have been popular in the
                           From Olympus, PowerNap’s output will be  Gulf in recent years amid low oil prices, which
                         transported to market on the Mars pipeline.  deterred companies from investing in more
                           “Shell has been producing in the Mars  capital-intensive new offshore platforms. Now
                         Corridor for more than 25 years, and we con-  oil prices may be higher, but offshore producers
                         tinue to find ways to unlock even more value  could remain wary of major new projects owing
                         there,” stated Shell’s upstream director, Zoe  to their decarbonisation targets. That said, Shell
                         Yujnovich.                           noted in its announcement that its Gulf output
                           Shell discovered PowerNap in 2014 and has  is among the lowest in terms of greenhouse gas
                         estimated it to hold more than 85mn boe of  (GHG) emissions intensity in the world for pro-
                         recoverable reserves. The project was sanctioned  ducing oil.™

       P8                                       www. NEWSBASE .com                         Week 13   31•March•2022
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